A drawdown disclosure is the vendor or manager telling you, plainly, the worst peak-to-trough fall their strategy has taken — and how it was measured. It is the least glamorous number on any results page and the most useful one. The return tells you the reward on offer. The drawdown tells you what you have to survive to collect it, and whether you actually could.
What gets disclosed
An honest disclosure gives you more than a single figure:
- Maximum drawdown — the largest fall from a peak to the following trough, as a percentage of the account.
- Equity drawdown, not only balance — the fall including open, floating trades, not just closed ones. A strategy can show a flat balance while sitting on a deep floating loss.
- When it happened and how long recovery took — a 30% fall that took eight months to recover is a different animal from one recovered in a fortnight.
A figure with no context — "max drawdown 15%" and nothing else — is closer to a slogan than a disclosure.
Why it matters more than the return
Returns are what people chase; drawdowns are what make them quit. You only earn the headline number if you stay invested through the worst stretch, and most people do not. The drawdown is the test of whether the return is reachable for you, rather than for a chart.
A high return with an undisclosed drawdown is not information, it is bait. The one figure that decides whether you last long enough to see the return is the one being left out.
A worked example
Two EAs, each on a £10,000 account:
- EA A — returns 40% a year, maximum drawdown 12%. At its worst you are about £1,200 down.
- EA B — returns 90% a year, maximum drawdown 55%. At its worst you are about £5,500 down.
EA B has the better return by a distance. But being £5,500 down on a £10,000 account is the point where most people close the trade, switch the EA off, or miss the recovery entirely. A return you can actually hold is worth more than one you bail out of. Without EA B's drawdown figure, you would never know which situation you were buying.
Balance versus equity
Watch which drawdown is quoted. A closed-trade balance curve can look calm while the account carries a deep floating loss on open positions — common with grid and martingale systems that avoid taking losses. Equity drawdown, measured on the running account value, shows the pain the balance figure hides.
What a missing disclosure tells you
Silence on drawdown is itself a data point. A vendor confident in a strategy has no reason to hide its worst run; a vendor hiding it is usually hiding the run that would put you off. Ask directly, and if you cannot get a straight equity-drawdown figure from a verifiable account, price the strategy as though the drawdown is bad — because that assumption is why it is missing.
The Karnek note
Karnek measures drawdown from your live terminal on both balance and equity, so a floating loss cannot hide behind a flat balance line. It is read-only and can never trade — it reports the worst fall your account took, it does not cause one.
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Written and reviewed by the Karnek Research team. Last updated August 2026.
Educational content only - not financial advice. Past performance does not predict future results. Trading carries significant risk.